Melbourne is about to run short of homes by a wide margin.
The City of Melbourne projects a need for 21,600 additional dwellings by 2028, yet the residential apartment pipeline is on track to supply just 8,900. That leaves a shortfall of 60 percent, and it sits at the center of a new study of the Melbourne central business district’s property market.
The study is titled the “Melbourne CBD Market Outlook 2025.” Far East Consortium, a well-known Melbourne property developer, commissioned the research firm Urbis to produce it. The report looks at how the market is changing, what drives buyer behavior, and how the broader economy is likely to shape 2025 and the years beyond. Its overall verdict is that the inner-city core of Victoria’s capital has held up well across market cycles. Population growth, major infrastructure projects, and strong rental demand support that conclusion, and the report says they make the area appealing to investors building wealth over the long haul. It organizes its argument around three pillars, with a few supporting factors alongside them.
The first pillar is population. The report states that Melbourne is on course to pass Sydney as Australia’s largest city by 2032, and it projects a population of 7.45 million by 2040. Most of the growth over the last decade has come from international Immigration. In 2024 alone, 446,000 new overseas arrivals landed in Melbourne. Every one of them needs somewhere to live, which feeds straight into demand for Melbourne CBD real estate. Against the supply numbers above, the Imbalance is sharp. That is why the report sees strong potential for accelerated capital growth and solid rental returns on Melbourne apartments.
The second pillar is infrastructure. According to the report, a run of major projects is reshaping how the city connects and lifting property values along key corridors. It also expects these projects to Improve Melbourne’s livability and strengthen its long-term standing as a high-yield investment destination.
Two of the projects are due in 2025. The Melbourne Greenline is a $224 million initiative that will convert public space along the Yarra River into a linear park 4 kilometers long, with new recreational and commercial opportunities. The West Gate Tunnel Project is a critical road upgrade. It gives drivers a vital alternative to the West Gate Bridge, eases congestion, and streamlines freight and passenger traffic between Melbourne’s western precincts and the CBD.
The North East Link follows in 2028. It is the largest road project in Victoria’s history, and it will join major arterial routes across Melbourne’s north and east, shorten travel times, and support decentralized urban growth. The Queen Victoria Market Renewal is scheduled for 2029. This $268 million revitalization of the city’s historic marketplace will bring new public plazas, dining districts, and community hubs designed to attract residents and tourists alike.
The Suburban Rail Loop, slated for 2035, is a multi-billion-dollar transit project linking middle-ring suburbs. It is expected to shorten commutes and lift housing demand near strategic transport hubs such as Clayton and Sunshine. All of these projects sit within Victoria’s $107 billion infrastructure pipeline. The report credits that pipeline with strengthening Melbourne’s global competitiveness and supporting property value growth for Melbourne CBD apartments.
The third pillar is affordability and rental performance. The report calls affordability a primary catalyst for inner-city housing demand. In 2024, the median price of a Melbourne CBD apartment was roughly 56 percent below that of a detached suburban house. High-density property therefore offers an accessible entry point for experienced buyers and first-time investors alike.
Rental demand in the CBD core has hit unprecedented levels as well. The median weekly rent climbed to $750 in late 2024 from $690 a year earlier, an increase of 9 percent. The vacancy rate averages only 2.4 percent, and that persistent tightness underpins the momentum. Newly built CBD apartments have consistently produced strong gross rental yields, averaging 4.8 percent. The report says this reinforces their defensive qualities within a portfolio exposed to inflation.
Land supply is another factor. Prime parcels inside the CBD grid are growing scarcer, which positions existing stock for significant capital appreciation. The report notes that strict limits on new supply will naturally push capital values higher as buyers compete more intensely.
The wider economy, in the report’s words, provides a stable macroeconomic floor. Australia’s national unemployment rate is near a healthy 4.0 percent, comfortably under its 10-year historical average of 5.3 percent. Consumer sentiment has visibly rebounded too. The ANZ-Roy Morgan Index gained 12 points year on year to reach 86.4, helped by inflation cooling to 2.8 percent.
Major financial institutions also expect the Reserve Bank of Australia to cut interest rates, bringing the cash rate down toward a range of 3.35 percent to 3.85 percent. Borrowing costs are therefore set to moderate. According to the report, this easing cycle will unlock pent-up buyer demand and speed up market activity across Victoria.
Pulling these threads together, the report describes rapid demographic expansion, heavy infrastructure spending, and exceptional rental performance as an elite investment proposition for the Melbourne CBD. Because future high-density development in the central grid is fundamentally scarce, it concludes that well-located residential assets are uniquely positioned to outperform over the long term. It adds that choosing the right asset class and location is paramount, and it advises buyers to consult a qualified property strategist or financial advisor before exploring Melbourne CBD investment opportunities.
The numbers in the report point in a single direction: a 60 percent apartment shortfall, a population heading toward 7.45 million, and a $107 billion infrastructure pipeline all indicate that demand for central Melbourne housing is growing faster than the city can build.
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